French Connection plunges into the red

French Connection is this week expected to reveal that its recovery has faltered in the first six months of the year.

Analysts believe that chairman and chief executive Stephen Marks will report a loss of about £3m on Tuesday owing to the effect of the wet summer on sales at its high street stores.

French Connection is one of a number of fashion retailers including Next and John Lewis due to report first-half results this week as the reporting season gets into full swing. All eyes are on current trading with store chiefs braced for a downturn as higher interest rates crimp consumer spending.

Marks is trying to revive French Connection's fortunes by selling £75 dresses such as this season's must-have black-and-white-striped 'Tellin' frock rather than FCUK branded T-shirts and caps.

The business will make profits of about £8m this year, a fraction of the £38m seen in 2004. Key to the turnaround is winning bigger wholesale orders from department stores and fashion chains like USC. Orders have fallen 40 per cent and investors are worried that upmarket ranges will not appeal to those who loved its risque slogans. 'Each season it has got better and further away from FCUK,' says one wholesaler. 'That suits our business but may not appeal to other customers of the brand.'

Meanwhile, analysts fear that underlying sales at Next stores could be down as much as 6 per cent as customers defect to a more fashionable Marks & Spencer. However, some brokers remain fans of Next as it has a record of protecting profits even in tough trading conditions.